Finding rare common ground in the increasingly partisan Alaska Legislature, Democrats and Republicans on Friday found at least one tax-cut bill both sides could support.
Sen. Cathy Giessel's measure would restructure one of the state's few taxes, the corporate income tax.
"As we know, government doesn't produce anything, it takes from citizens who take risk and produce something of value," said Giessel, the Turnagain Arm-North Kenai Republican.
Alaska’s corporate income tax starts at a rate of 1 percent for those making a profit of $10,000 or less. But the top tax rate of 9.4 percent is reached at a profit of $100,000. Giessel said those brackets have not changed since 1981, and that accounting for inflation the top rate of 9.4 percent should not be reached until $222,000 today.
The Alaska Senate moved Friday to change those brackets, including eliminating the 1 percent tax for the first $25,000 of corporate income. That amendment to Giessel's bill was sponsored by a frequent Giessel opponent, Sen. Bill Wielechowski, D-Anchorage.
“Many of these businesses are struggling to survive,” Wielechowski said. “They need our help so they can grow and create more jobs for Alaskans.”
Wielechowski's tax-cut amendment was adopted by the full Senate, and he and many other Democrats joined Giessel as co-sponsors of her bill.
Giessel said her measure, Senate Bill 7, "leaves money in the hands of capital producers -- people who are producing wealth. It allows them to expand their businesses and hire more Alaskans."
The bill had broad support from chambers of commerce around the state, and one of the state's Native corporations joined in supporting it, she said.
The actual cost to the state will be minimal. A state Department of Revenue estimate produced before the small-payer tax exemption was included calculated the cost at $3.8 million per year to the state, based on recent years' tax payments. Last year, corporate income taxes amounted to $667 million from the petroleum industry and $100 million from non-petroleum corporations. In Alaska, only C-corporations pay corporate income taxes.
The bill wasn't without partisan overtones, however. As soon as it passed the Senate, Giessel took a shot likely aimed at Wielechowski.
"I appreciate the amendment," she said. "It demonstrates to me that the philosophy of reducing government take is spreading throughout this body," she said.
The bill passed 18-1, with only Sen. Berta Gardner, D-Anchorage, casting a protest vote based on the failure to adjust the base student allocation for Alaska's schools.
"It occurs to me that this is the fourth year that our schools will not have had an inflation increase," she said. "As a protest against that I'm going to vote against this bill."
The bill now awaits action in the House of Representatives.
Contact Pat Forgey at pat(at)alaskadispatch.com